Mining major Sesa Goa has refuted allegations of over- and under-invoicing of exports and imports worth over Rs 1,000 crore, asserting that corporate fraud investigation body, the Serious Fraud Investigation Office, carried out the probe with a “pre-determined mind” and ignored the firm's explanations.
In a letter to the Corporate Affairs Secretary, Sesa Goa said, “The SFIO seems to have carried out investigations with a pre-determined mind and aims to have been to somehow establish wrongdoing by the company. To achieve this aim, the SFIO has either conveniently ignored the detailed explanations of the company or not even made replies as part of case records.”
SFIO findings
After an investigation spanning over one-and-a-half year, the SFIO had found that iron ore exporter Sesa Goa has over-invoiced import receipts of coking coal by Rs 14.6 crore and sales of iron-ore by Rs 42.51 crore, while under-invoicing exports by Rs 1,002 crore over a period of 10 years.
Under-invoicing is normally done to avoid paying tax. Under the practice, companies mention in their records an amount less than what was actually delivered and pocket the difference.
The SFIO has recommended prosecution against Sesa Goa's Managing Director and the Company Secretary on nine grounds for violations under the Companies Act, 1956.
Regarding allegations of under-invoicing of exports of iron ore, the company said it was sufficiently explained to the SFIO that the prices realised from Zhangdian, a small Chinese steel mill, were higher because the contract was entered into at a time when international demand was very high and “the SFIO did not even care to compare the prices charged by other Goan iron-ore suppliers vis-à-vis Sesa Goa's prices.”
“Even if MMTC's long-term price with Japanese buyers for 65 per cent Fe fines (which is much higher grade of iron ore than that of Sesa Goa or other exporters from Goa) is compared with that of Zhangdian price, one needs to conclude that MMTC also ‘under-invoiced' hundreds of crores of rupees if one goes by SFIO methodology. This is industry price and no motive can be attached to it,” it said.
Agency commission
On the allegations by the SFIO that Sesa Goa made excess payment of agency commission to sales agent Mitsui & Co (of Japan and Hong Kong), the company explained that it was done for purely “commercial reasons”. The company said even state-owned MMTC offered a similar commission.
“In spite of alleged higher commission paid to Mitsui &Co for sale of iron ore in China vis-à-vis the commission paid to traders in Pakistan and Turkey, the net realisation per tonne of iron ore supplied to China is more than that of Pakistan and Turkey... This establishes that the commission paid to Mitsui was for strong commercial reasons,” it said.
The company added that all the relevant information was submitted to the SFIO, which chose to ignore it and went ahead with the allegations.